Suppose that in 1965 Japan had an initial per capita GDP of $12,000 per year and China had a per capita GDP of $5,000. But China is growing at 5 percent per year and Japan is growing at 3 percent per year. ________ would have been richer in 2015 with a per capita GDP of approximately ________.
A) Japan; $5,000
B) Japan; $31,500
C) China; $7,500
D) China; $60,023
E) Not enough information is given.

Question

Quizplus · Accepted Answer

To find out which country would be richer in 2015, we need to calculate their per capita GDP after 50 years (2015-1965).

For Japan: 
Initial per capita GDP = $12,000 
Growth rate = 3% per year 
Number of years = 50 
Using the formula:  
Per capita GDP in 2015 = $12,000 x (1 + 0.03)^50 = $31,499.31 
So, Japan's per capita GDP in 2015 would be approximately $31,500.

For China: 
Initial per capita GDP = $5,000 
Growth rate = 5% per year 
Number of years = 50 
Using the formula:  
Per capita GDP in 2015 = $5,000 x (1 + 0.05)^50 = $60,021.26 
So, China's per capita GDP in 2015 would be approximately $60,023.

Therefore, Japan would have a per capita GDP of $31,500 in 2015, while China would have a per capita GDP of $60,023 in 2015. Hence, the answer is B.

Suppose That in 1965 Japan Had an Initial Per Capita